Fiscal Constraints Amidst Development Aspirations

J&K Budget 2025-26

Preparing the maiden budget for Jammu and Kashmir as the head of an elected government of a state downgraded to a UT and remaining under central rule without an elected government for more than seven years with overwhelming challenges was an arduous task for Chief Minister Omar Abdullah.

While his speech paints a hopeful picture of a “new and prosperous” J&K, a closer look reveals a delicate balancing act necessitated by fiscal realities and the people’s aspirations: high hopes with vivid memories of recent election promises.

As Omar Abdullah seeks to lay the foundation for ‘long-term growth, stability, and self-reliance’ of J&K, he has to walk a tightrope to keep the state’s mounting debt under control. However, his prudent management to keep the fiscal deficit under leash has come at a cost: a leaner budget. This year’s budget allocation of Rs 1.12 lakh crore is Rs 6080 crore or 5% less than last year’s budget announcement of Rs 1.18 lakh crore. The reduction in budget allocation, along with 4-5% inflation, raises concerns about the government’s ability to realise its ambitious development goals fully.

The CM’s speech, though, outlines a comprehensive vision, touching upon crucial sectors like rural development, agriculture, tourism, and industry. But translating these aspirations into tangible outcomes requires substantial financial investment. Moreover, the pervasive challenge of inflation adds another layer of complexity. Rising prices erode purchasing power, making it harder to stretch limited budgetary resources.

As Omar Abdullah seeks to lay the foundation for ‘long-term growth, stability, and self-reliance’ of J&K, he has to walk a tightrope to keep the state’s mounting debt under control. However, his prudent management to keep the fiscal deficit under leash has come at a cost: a leaner budget. This year’s budget allocation of Rs 1.12 lakh crore is Rs 6080 crore or 5% less than last year’s budget announcement of Rs 1.18 lakh crore.

The emphasis on fiscal prudence, curbing non-priority spending, and enhancing revenue collection is understandable, given J&K’s historical fiscal stress. However, austerity measures must be carefully calibrated to avoid stifling economic growth and hindering essential public services, especially when inflation is already squeezing household budgets.

The budget’s focus on digital governance and healthcare accessibility is welcome. Initiatives like the SEHAT app and the expansion of digital services have the potential to improve efficiency and transparency. Yet, the question remains: are the allocated funds sufficient to ensure the effective implementation of these programs, particularly when the real cost of implementation is escalating due to inflation?

The agricultural sector, a cornerstone of J&K’s economy, receives significant attention. The success of the Holistic Agriculture Development Program (HADP) will be crucial in boosting farmer incomes and creating employment opportunities. The allocation to HADP has been reduced Rs 800 crore from last year’s 1000 crore plus. However, the program’s impact will depend on the timely disbursement of funds and effective implementation, and whether the farmers can see real increases in their income, that outpace the rising cost of goods.

Similarly, the ambitious plans for tourism development require substantial investment in infrastructure and marketing. While the government’s efforts to promote offbeat destinations and sustainable tourism are laudable, the sector’s growth will depend on attracting private investment and addressing critical challenges like sustainability and waste management, while also dealing with rising operational costs due to inflation.

Some headline-making announcements like free rides for women in public transport and 200 free units of solarised power for AAY population fail to impress the general public. The argument is J&K has almost non-existent public transport. About 850 public buses with a passenger capacity of 35,000 people do not even suffice the transport needs of the 1% of the 1.2 crore population of J&K. The 200 e-buses for two metro capital cities, announced in last year’s budget, failed to take route. CM has repeated the announcement this year.

The government’s commitment to empowering MSMEs and startups is also noteworthy. However, ensuring access to finance and creating a conducive business environment will be essential for fostering entrepreneurship, and this becomes more difficult when inflation creates financial uncertainty. In last year’s budget, a good amount was announced under Youth Startup and Seed Capital Schemes but both schemes failed to take off.

Also, the budget is unable to address the burgeoning unemployment that, as per some private surveys, has reached 32%.

Whatever the allocations, the success of this budget will be now judged by its ability to deliver tangible benefits to the people of J&K. While the government’s efforts to reduce the fiscal deficit are commendable, it must also prioritize investments that will drive economic growth, create jobs, and improve the quality of life for all citizens, while also mitigating the effects of inflation.

The challenge lies in navigating fiscal constraints and inflationary pressures while maintaining momentum on the development path. This budget sets the stage for a critical year ahead, one that will test the Omar Abdullah government’s ability to balance its books and deliver on its promises, in a climate of rising prices.

The turbulent political situation in Jammu and Kashmir for about the past three decades has marred its economic development. From being a self-sufficient state in its economic needs once, J&K has now reached a situation where it always has to be dependent on the central funds.

More than 50% of its expenditures are met from the aid and grants provided by New Delhi. Besides, J&K each year raises hundreds of crores in the form of debt. It is becoming extremely difficult for the government to pay back the interest on this debt, not to talk of the debt itself.

The political situation created vested interests and inefficient governments always had something to blame to keep away from prioritising the economic and other developmental needs of the people. An economically weak J&K suited these vested interests, the planning and policies they made never had been for reaping the available resources of the UT. Rather, certain sectors, which are totally dependent and interlinked to external forces, were given priority over the sectors, which have been time tested in J&K and are mostly weathered to external conditions.

J&K in general and Kashmir, in particular, has been an agrarian economy for centuries. And the available natural resources in the state are fertile land, forests and an abundance of water added to temperate climatic conditions, which makes it one of the best-suited places for agriculture, horticulture and other related occupations in the world.

Though the majority of the people here are associated with this profession but the mode of their operations is still primitive with negligible use of technology. Despite that, it is the main contributor to the economy. According to recently issued government figures, yearly export returns from the fruits are about Rs 10,000 crore which is only next to government salaries. Kashmir valley supplies more than 70% of the total consumption of apples in India. But a Kashmir apple fetches only half of what a Himachal Apple gets. J&K has not enough post-harvest infrastructure available and processing of the fruits is happening at a very limited level.

There is no horticulture policy in the state like we have a policy for tourism. Neither there has been any bigger provision in the state budget for the horticulture industry, except for a few tax concessions and schemes introduced in recent years.

Some of the schemes introduced by the government, like high-density plantations look very promising and the results it has shown so far are encouraging. Similarly, the government has roped in some outside investments like that of NAFED for developing high-density orchards and creating infrastructure like cold storage. These tie-ups are very important and will provide the much-needed capital for modernising the horticulture sector in UT. But some farmers have shown scepticism saying that these same are being planned in such a way that will benefit the middlemen and businessmen rather than the farmers.

The UT administration must make sure that all the schemes are formulated in a way that their first priority must be to benefit the poor farmers instead of creating a class of middlemen.

No doubt the horticulture industry needs modern post-harvest technology, processing infrastructure and new marketing strategies. This is only possible if UT makes the sector a priority and there is a long-term policy for it, which particularly revolves around the farmers. Modernising horticulture is the only way to bring economic self-reliance to Jammu and Kashmir.

Increasing tourist inflow promise for economic revival

That more than 72 lakh tourists have visited Jammu and Kashmir since September 2021, according to the Union Tourism Ministry figures, offers a good sign of revival of the UT’s tourism sector which has seen a lot of turbulence in the past. Of these 72 lakh tourists, at least 1.45 lakh have visited the Union Territory in December 2021 alone. This good inflow of visitors comes at a time when the J&K UT, like other parts of the country, has seen recurring waves of the Covid19 pandemic which, among other sectors, badly hit the tourism sector which is considered to be an important area vis-à-vis economy of the UT.

There is no denying the fact that the tourism sector holds a great promise for uplifting the UT’s economy. But that’s only if all stakeholders get serious to realise this goal. It is important that all the stakeholders—government, local tourism players, tourism department, and other concerned members of the civil society—put their heads together and contribute to realizing this goal in a mission mode.

The Central government as well as the UT administration has already underlined its focus on the revival of tourism in Jammu and Kashmir. The government last year announced what it called a “stimulus package” which included an economic package related to the travel and tourism sectors with the larger goal of giving a boost to the UT’s economy. The said stimulus package offers small loans of Rs 10 lakh to travel and tourism stakeholders and Rs 1 lakh each to registered tourism guides for the next five years to undertake their respective activities under the scheme whose validity has been extended till the March of next year. Such a package can certainly help boost the small-time tourism stakeholders who have borne the maximum brunt of the pandemic as well as other turbulences in the Valley including the devastating floods of 2014.

There is no denying the fact that the tourism sector holds a great promise for uplifting J&K’s economy. But that’s only if all stakeholders get serious to realise this goal. It is important that all the stakeholders – government, local tourism players, tourism department, and other concerned members of the civil society – put their heads together and contribute to realizing this goal in a mission mode.

Local tourism players, as well as the UT’s Tourism Department, have a great role to play in ensuring fair practices for a lasting impression among the visitors to different parts of the UT. Even a small bad incident of fleecing of tourists will cause a dent to the tourism sector and its image.

Indeed, peace and tranquillity are important for the tourism sector to flourish in any place in the world, but it won’t be an exaggeration to say that unless and until all tourism stakeholders join hands with a sense of great seriousness, merely citing the tourist inflow figures won’t help in achieving the larger goal of turning the tourism sector to drive the UT’s economic transformation. Local tourism players, as well as the UT’s Tourism Department, have a great role to play in ensuring fair practices for a lasting impression among the visitors to different parts of the UT. Even a small bad incident of fleecing of tourists will cause a dent to the tourism sector and its image.

Moreover, there must also be a great focus of the government to not only explore new tourist destinations in areas of adventure, pilgrimage, destination and sightseeing tourism arenas but also develop the present tourism destinations on modern lines for high-end tourists as per the international hospitality standards. Gulmarg, Pahalgam and other tourism destinations are in great need of revival on several fronts. Unplanned and haphazard constructions taking place in these beautiful tourist places can not only contribute to their ugly looks, it would also cause lots of problems in future vis-à-vis their planning, development and expansion. In this context, it is important for Tourism Development Authorities to step up their vigil of the tourism destinations under their jurisdiction to check these unplanned constructions for the sake of the future of tourism stakeholders in the UT.

Regulating the inflow of vehicles into green spaces in tourist places must also be a priority for the concerned authorities, especially in famed places like Gulmarg, Sonmarg and Pahalgam—as well as important tourism destinations in the Jammu province—to secure these places in all respects in line with the requirements of their environmental settings.

All stakeholders are duty-bound to contribute to strengthening and developing the tourism sector for it to flourish and progress in a planned and futuristic manner.